Canada and the United States

Canada and the United States

The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. The two nations' mutual, largely unguarded 5,000-mile border does much to explain why: each is the other's largest trading partner, amassing $218 billion in trade in 1992; cross-border travel is easy; and they work together on common concerns about the quality of water and air. However, the relationship has not always been so cooperative. Although environmental treaties date to 1902, economic pacts have taken nearly a century to come to fruition. Traditionally, both countries warily put protectionism ahead of mutual interest, and they have retaliated in kind against tariffs, duties, and other barriers to free trade. Only in 1988 did the two enter into the U.S.-Canada Free Trade Agreement (FTA) (Pub. L. No. 100-449, 102 Stat. 1851), a groundbreaking pact designed to eliminate these barriers. It paved the way for the historic North American Free Trade Agreement (NAFTA) in 1993.

Early relations between the two countries were rocky. In the mid-nineteenth century, trade foundered on stubborn protectionist policies; each country feared the economic success of the other at its own expense. The 1854 Elgin-Marcy Reciprocity Treaty (10 Stat. 1089) was intended to open up trade in natural resources but it barely lasted a decade. Its failure prompted Canada to spend fruitless years trying to loosen U.S. trade restrictions before formulating, in 1879, a national policy of high tariffs by which it hoped to force the United States back to the negotiating table. But the table remained empty for nearly a century. The only trade agreement between the two nations was the General Agreement on Tariffs and Trade (GATT), a 100-nation agreement first reached in 1947. The generality of the GATT accords did little to address the specific issues facing these two trading partners and it caused Canada, in particular, frustration. But U.S. prosperity throughout the mid-twentieth century meant it could afford to ignore Canadian complaints.

The two were more willing to negotiate on environmental concerns. The landmark agreement in this area is the Boundary Waters Treaty of 1909. It established the International Joint Commission (IJC) to deal with the issues of water resource management, a set of concerns referred to as transboundary issues because of the two nations' common border. Made up of technical specialists from various federal, state, and provincial governments of the United States and Canada, the IJC has authority to approve joint projects and to investigate complaints. Since the 1970s its duties have expanded as the result of the Great Lakes Water Quality Agreements that established goals for restoring the damaged ecosystem of the Great Lakes. Contemporary concerns facing the IJC include water levels, Pollution, acid rain, and climate changes, with a growing emphasis on the use and maintenance of river systems. Critics generally agree that the success and innovation of this commission represent a model for international cooperation.

Despite progressive solutions to environmental problems, it took the United States and Canada until the late 1980s to forge better economic ties. The slow progress toward open trade was due to mutual suspicions, greed, and a long history of retaliatory actions. This hindrance stood in stark contrast to the countries' cultural similarities and cooperation in other areas. They had been allies in both world wars and both remained key members of the North Atlantic Treaty Organization (NATO). But war is an unusual circumstance; military allies can still be less than friends in trade. Then, the last half of the twentieth century unexpectedly changed everything—domestic industrial decline, brought on by a rise in international competition, toppled the United States from a position of preeminence and made Canada more important to its plans for long-range prosperity. Canada underwent a great change in its historically isolationist outlook as it too suffered economically. The 1984 election of a conservative Canadian government led by Prime Minister Brian Mulroney was a watershed event. Mulroney's victory was based on promises of opening U.S. markets to Canadian business. Both sides wanted to remove the barriers of high tariffs, antidumping fees, and countervailing duties (forms of protectionism that limited the expansion of each nation's markets) in order to create new jobs and wealth.

On January 2, 1988, negotiations between the administrations of President ronald reagan and Prime Minister Mulroney resulted in the signing of the FTA. In succeeding where previous generations had failed or not even tried, Reagan declared that the FTA would remove an "invisible barrier of economic suspicion and fear." The pact had five broad goals: (1) eliminate barriers to trade in goods and services, (2) improve fair competition, (3) liberalize investment conditions, (4) establish procedures for a joint administration of the agreement, and (5) lay the foundation for future cooperation. The FTA also relaxed U.S. immigration rules for Canadians, allowing freer travel across the border for businesspersons.

On the administrative level it created a temporary body for resolving disputes, the binational Extraordinary Challenge Committee, which was given a seven-year commission to hear appeals. Not surprisingly, this issue had been the most troublesome during the negotiations preceding the FTA; it proved slightly problematic in practice, too, with the United States generally losing its complaints. Nonetheless, the FTA was seen as a boon for U.S. business as a whole, removing Canadian restrictions that had long been a sore point and emphasizing the resolution of disputes outside courtrooms.

The FTA's success laid the groundwork for an even more ambitious trade agreement between the United States, Canada, and Mexico, the much-anticipated NAFTA, enacted in 1993. NAFTA's changes were to be phased in over 15 years, and its purpose is to liberalize trade between the three countries in hopes of emulating the economic cooperation long enjoyed by European nations. In practice, its broad aims proved highly controversial.

Just looking at the numbers, however, suggests that NAFTA has been an unqualified success in expanding trade between the United States, Canada, and Mexico. The United States has nearly doubled its trade to its NAFTA partners in the time since the agreement was signed. As for Canada, its merchandise exports to its NAFTA partners since the implementation of NAFTA increased 95 percent, from $117 billion to $229 billion.

This is not to say that NAFTA has resolved all trade issues between the United States and Canada. A good example is a recent dispute over softwood lumber. U.S. lumber producers claim Canadian softwood lumber is subsidized by Canada illegally and that companies sell at below production costs. Because of these complaints, the United States placed a tariff of up to 29 percent on Canadian softwood lumber exports. The results have costs jobs in Canada and driven up home building prices in the United States. As of 2003, it was expected that only the World Trade Organization could resolve the dispute.

Relationships between the United States and Canada are not just about trade. Particularly in the days since September 11, 2001, they have been about security issues as well. After the attack on the United States, many Americans expressed concern about what they viewed as the lax security and border enforcement on the Canadian side of the border. At the same time, Americans recognized the immediate assistance Canada provided the United States during the post-attack period when the area of the continental states constituted a no-fly zone and many planes were rerouted to Canadian airports.

In response to those concerns, in December of 2001 the Canadian and United States governments signed a "smart border" accord. The accord featured an action plan with 30 points designed to secure the cross-border flow of goods and people, protect infrastructure, and improve information sharing and coordination to enhance these objectives. Among other items, the accord includes development of a system for pre-approving goods, factories, carriers, drivers and trucks for electronic pass-through clearance at border checkpoints. While the accord has not succeeded in quieting all security complaints from the United States, it has helped smooth things out.

Security is not the only concern regarding cross border traffic. In mid-2003 Canada was considering the decriminalization of marijuana which caused American law officials to worry about whether the drug trade would increase as a result on the Canadian side of the border. U.S. Drug czar John Walters has warned that Canadian laxity on marijuana could lead to tighter control being placed on the cross-border flow of people and goods.

There have been other tensions over the Canadian government's refusal to support the war in Iraq. Yet despite these problems it seems clear that Canada and the United States have more common interests than disputes. At the beginning of the twenty-first century, Canada and the United States continued the economic integration that NAFTA put on the fast track, and seemed likely in the future to become more interdependent than ever.

Further readings

"Dispute Resolution under Chapter 19 of the United States–Canada Free-Trade Agreement: Did the Parties Get What They Bargained For?" 1995. Stanford Journal of International Law (winter).

"The Effect of the United States–Canada Free Trade Agreement upon United States Immigration Law."1988. Practicing Law Institute (October 1).

"From Customary Law to Environmental Assessment: A New Approach to Avoiding Transboundary Environmental Damage between Canada and the United States." 1995. Boston College Environmental Affairs Law Review (winter).

McKenna, Barrie. February 3, 2003. "Canada Turns on the Charm to Woo the U.S." The Globe and Mail.

"The North American Experience Managing Transboundary Water Resources: The International Joint Commission and the International Boundary and Water Commission." 1993. Natural Resources Journal (spring).

Rae, Robert K. 2000. "The Politics of Cross Border Dispute Resolution." Canada United States Law Journal.

"United States–Canadian Free Trade: Economic Repercussions of the CFTA and NAFTA on the United States, Canada, and the Great Lakes Region." Great Lakes Symposium 1994. University of Toledo Law Review.

In the Third Protocol to the Convention between Canada and the United States with Respect to Taxes on Income and Capital signed in 1995, the United States and Canada announced a general reduction in the withholding taxes on dividends, interest, and certain royalties.

Again, I thank you for your company's opposition to the recently proposed framework for a negotiated interim agreement, and urge continued support for free trade in softwood lumber between Canada and the United States.

Since North American emissions reductions were not dictated by the model used for European countries, Canada and the United States have been left to decide for themselves what levels of reduction should be included for them in the Gothenburg Protocol.

Because dissatisfaction is often the product of disparities between expectation and reality, it may be that physician dissatisfaction in Canada and the United States has most to do with the fact that these professions are in the early decades of profound changes.

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